Bulgaria to Finance External Debt through Foreign Markets

Finance | March 30, 2012, Friday // 12:38|  views

Deputy Prime Minister and Finance Minister Simeon Djankov has given up on intentions to find local sources for the 2013 pending repayment of foreign debt. Photo by BGNES

The Bulgarian government has decided to give up on financing repayment of external debt with internal resources and will seek money from foreign markets.

The decision is written in a draft that is expected to be voted on soon, the Friday issue of "Capital Daily" reports. Bulgaria has to find and repay EUR 818.5 M in foreign debt by January 2013.

The document makes it clear that the intention of Deputy Prime Minister and Finance Minister Simeon Djankov to use three local sources – the domestic market, the Silver Fund and the fiscal reserve to finance pending payments is not going to materialize.

The draft notes that Djankov should initiate the withdrawal of a bond loan for EUR 950 M.

Deputy Minister of Finance Boryana Pencheva is quoted saying that the preliminary procedure for a bond issue has progressed and the decision will be voted at the Cabinet meeting next week. According to Pencheva, the time is right to issue bonds on foreign markets, an opinion that is backed by most experts who monitor what is happening on financial markets, writes Capital.

The experts, cited in another publicatio of by the same newspaper, point out that it makes sense for Bulgaria to issue at least EUR 500 M. Recently, the Finance Minister had commented that the new global bonds will ensure no more than EUR 300 M.

The draft further lists as motives for the decision the fact that the internal market has played its role in the last 2 years in providing 80% of the gross debt financing of the State, but "is characterized by relatively limited liquidity and not so broad investor base, dominated by local residents." It also notes that Bulgaria must not count on just one source of financing.

Financing of debt through foreign markets will ensure that the fiscal reserve would remain above BGN 4.5 B at the end of this year and in 2013 will remain between BGN 4 and 4.4 B, according to the Finance Ministry.

Pencheva informs that the whole process from the political decision to the obtaining the loan and the ratification of the loan contract will take maximum 10 weeks. During this time, the government must choose the best offer from bank bids, but the process will not be long because the Public Procurement Act does not cover this procedure.

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Tags: Deputy Prime Minister, finance minister, Simeon Djankov, sources, repayment, foreign, debt, Boryana Pencheva, Silver Fund, local, market, fiscal reserve, loan, bond, bonds, issue


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